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Saudia Faces Court Dispute With Lessor Over 50 Airbus Aircraft

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A Dubai-based financial services firm is alleging a breach of lease agreements by Saudi Arabian Airlines concerning 50 of its Airbus aircraft. The lessor, Alif Segregated Portfolio Company, is seeking at least $460 million in unpaid rent and maintenance costs.

A330-300-Regional-Saudi-Arabian-Airlines
Saudi Arabian Airlines, also known as Saudia, has 32 Airbus A330-300s in its fleet. Currently, 23 of those jets are active and in-service, while nine are listed as parked. Photo: Airbus

Details of the claim

The claim, filed in London’s High Court filed last month by Dubai-based financial services firm Alif Segregated Portfolio Company, is alleging that its lease agreement with Saudi Arabian Airlines (Saudia) was breached.

According to Reuters, the plaintiff is seeking at least $460 million in unpaid rent and maintenance costs. Reuters also reports that Alif is also demanding other damages and costs.

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A320neo-Saudi-Arabian-Airlines
Saudi Arabian Airlines has yet to begin operating the A320neo. It’s most recent order of the jets was in the summer of 2019. Photo: Airbus

The claim centers around 50 Airbus aircraft, announced by Airbus at the 2015 Paris Airshow. The deal at the time was considered the largest aviation deal to be secured via Islamic financing. The deal, accounting for a third of Saudia’s fleet, was worth around $8.2 billion at list prices in 2015.

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More specifically, the 50-aircraft order consisted of 30 Airbus A320neos and 20 Airbus A330-300s. Under the agreement, Alif’s managing unit International Airfinance Corporation (IAFC) bought the planes. According to CH-Aviation, IAFC is incorporated as a Cayman Islands company but based in the United Arab Emirates. Saudia would lease the aircraft from this entity.

However, documents show that Alif is claiming Saudia has failed to pay basic rent after seeking to reduce its payments. The plaintiff is also alleging that Saudia has engaged in “unauthorized and unnotified engine and part swaps.”

Saudia_A330-300
Saudia is a full-service, state-owned airline and the flag carrier of Saudi Arabia. It is based in Jeddah but also has hubs in Riyadh, Medina, and Dammam Photo: BriYYZ via Wikimedia Commons

“We are currently in discussions with the lessor to resolve contractual differences, and we believe that common sense will prevail in the end,” – Saudia spokesperson via Reuters

In addition to the above statement, the airline also clarifies that active legal proceedings have not yet begun.

How will this unfold?

Without looking at the financial details, it isn’t easy to know how valid this claim is. Of course, considering at the situation and the amount of money at stake, the plaintiff would have to be quite certain of its allegations.

The threat of a lawsuit and messy legal battle is certainly unwelcome – especially at a challenging time like this. By the sounds of Saudia’s statement to the media- “currently in discussions to resolve contractual differences” sounds like the airline will seek to resolve the dispute outside of court and come to a settlement agreement.

Of course, we’ll just have to wait and see what happens in the coming weeks.

What do you think of this dispute? How do you think it will end? Let us know your thoughts in the comments.

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